Is Your Company Correct About PF Deductions? Understanding Gross vs. Basic Salary Limits

Hello, One of my friends is earning around 17,000 monthly, and her basic salary is less than 15,000. Even though her basic salary plus dearness allowance (DA) is less than 15,000, her company is not deducting her Provident Fund (PF). They are saying that it is optional for employees earning more than 15,000 gross monthly.

PF Ceiling Limit: Gross or Basic Salary?

May I know if this is correct? Our company is currently registering for PF, and we have many employees who might fall under PF regulations.

So, is the PF ceiling limit applicable to the gross or basic salary?

Kindly provide your feedback on this.

Thank you.

EPF Applicability and Salary Considerations

EPF is applicable to those employees whose salary at the time of joining does not exceed Rs 15,000. Here, two things are required to be verified. One, salary means PF qualifying salary, which includes basic salary and Dearness Allowance. Basic salary refers to the total salary as per the contract of employment, excluding any house rent allowance. Allowances paid universally across the company should be considered as part of the basic salary only. Therefore, if the Basic and DA exceed Rs 15,000, the employee may be excluded from PF coverage.

Considerations for Existing PF Members

Moving on to the second point, if a newly joining employee is offered a salary of more than Rs 15,000 and is an existing PF member from previous employment, they should still be given PF in your establishment, even if their salary exceeds Rs 15,000.

Employer Contribution Limits

Employers can limit the contribution payment to 12% of Rs 15,000. The salary for contribution purposes should be the deciding factor for EPF Act applicability. If the employer considers only basic wages for contributions, then the same basic pay should be used to determine an employee's PF coverage. Hence, if the employer has been deducting PF based on basic salary only, the employee should receive PF if their basic salary is less than Rs 15,000.